***COMPANIES ARE CURRENTLY NOT REQUIRED TO FILE BENEFICIAL OWNERSHIP INFORMATION (BOI) REPORTS IN CONFORMITY WITH THE CORPORATE TRANSPARENCY ACT, BUT MAY CONTINUE TO VOLUNTARILY FILE BOI REPORTS.***
The Corporate Transparency Act (CTA) was enacted by Congress in 2021 and became effective as of January 1, 2024. Prior to the Corporate Transparency Act, businesses were not required to file information about the ownership structure or individual information of owners that were involved with the entity. The purpose of the CTA is to require businesses to now file ownership information in an attempt to crack down on money laundering, terrorist financing, tax fraud, and drug trafficking.1
When the CTA went into effect, companies that existed prior to January 1, 2024 were required to file a Beneficial Ownership Information (BOI) report by January 1, 2025. However, there have been several cases across the country that have challenged the constitutionality and enforceability of the CTA, leaving business owners confused on the current state of the law.
In March 2024, the U.S. District Court for the Northern District of Alabama, Northeastern Division issued a declaratory judgment that prevented the plaintiffs in the matter from being held to the CTA filing requirements.2 On December 3, 2024, a federal district court in the Eastern District of Texas issued an order granting a preliminary injunction of the CTA and its filing requirements. This injunction started a judicial ruling ping-pong of the CTA status throughout the month of December of 2024. The timeline of recent CTA rulings is as follows:
January 1, 2024: Corporate Transparency Act BOI reporting becomes effective.
December 3, 2024: The CTA filing requirements put on hold per a nationwide preliminary injunction ordered by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc., et al. v. Garland, et al., No 4:24-cv-00478 (E.D. Tex.).
December 23, 2024: A motions panel of the U.S. Court of Appeals for the Fifth Circuit Court granted a stay and thus paused enforcement of the injunction. This resumed CTA filing requirements as initially intended, but with an extended filing deadline of January 13, 2025.
December 26, 2024: A different Fifth Circuit panel vacates the stay, which reinstates the injunction and halts filing indefinitely, with a March 25, 2025 oral argument scheduled for the matter.
December 31, 2024: The Department of Justice seeks a stay of the injunction pending an appeal from the Supreme Court of the United States.
This latest ruling means that filing requirements are on hold… for now. Although there is no current requirement to file a BOI report for your company, the future landscape of the CTA remains turbulent. The concern raised by the parties of the Texas case and the judiciary poses a constitutional balancing test that considers the CTA’s invasiveness and privacy concerns weighed against its intended security efforts. Although the district courts in Alabama and Texas have granted the preliminary injunctions filed against the CTA, there are several courtsthat have denied the motions for a preliminary injunction and ruled in favor of the CTA and its filing requirements.3 This just furthers the notion that the future of the CTA is unforeseeable.
FinCEN has indicated that voluntary BOI report submissions will remain an option moving forward. If the injunction once again is lifted, requirements will again become mandatory, but likely with more extended deadlines for compliance.
So, what does this mean for companies? The voluntary filing of a BOI report for your company would eliminate the uneasy feeling of remaining up to date with filing requirements. The initial consequences for failure to comply with the CTA as defined by the statue were steep, with both criminal and civil penalties at stake.4 More than 6.5 million BOI reports have allegedly already been filed as of November 2024.5 Voluntary filings of a BOI report may be the safest bet for companies in this uneasy terrain, however, at this point, it is at owners’ discretion.
Mackenzie Murphy’s Law will continue to monitor the situation and update readers on any future developments. If you have any questions or concerns about the CTA and BOI reports, please reach out through the “Contact” page.
1 Ohio Secretary of State, The Corporate Transparency Act, Federal Legislation Requiring Beneficial Ownership Information Reports (updated December 26, 2024)
https://www.ohiosos.gov/businesses/corporate-transparency-act/; See also Financial Crimes Enforcement Network, Beneficial Ownership Information(updated January 2, 2025), “The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.” https://fincen.gov/boi.
2 See National Small Business United v. Yellen, No 5:22-cv-1448 (N.D. Ala.).
3 Small Business Association of Michigan, et al. v. Yellen, et al., No. 1:24-cv-314 (W.D. Mich.); Firestone, et al. v. Yellen, et al., No. 3:24-cv-01034 (D. Or.); Community Associations Institute, et al. v. Yellen, et al., No. 1:24- cv-01597 (E.D. Va.).
4 Halloran, Lerner, and Hobson, Sifting Through the Corporate Transparency Act: Key Elements to Understand (April 19, 2024) https://www.americanbar.org/groups/business_law/resources/business-law today/2024-april/sifting-through-corporate-transparency-act/
5 Matha Waggoner, Journal of Accountancy, BOI Update: 6.5 million of 32 million reports filed so far (November 8, 2024) https://www.journalofaccountancy.com/news/2024/nov/boi-update-6-5-million-of-32- million-reports-filed-so-far.html